Nearing its 20th anniversary, chapter 15 of the Bankruptcy Code is an invaluable framework for coordinating cross-border bankruptcy cases involving foreign debtors that have assets located in the United States. It includes a host of provisions empowering a U.S. bankruptcy court to provide assistance to a foreign bankruptcy court or its representatives under the principle of international comity. One form of assistance'turnover of a foreign debtor's U.S. assets for administration in its "recognized" bankruptcy or restructuring proceeding'was the subject of a ruling handed down by the U.S. Bankruptcy Court for the Southern District of New York. In In re ECM Straits Fund I, LP, 2024 WL 4712995 (Bankr. S.D.N.Y. Nov. 7, 2024), the bankruptcy court approved a settlement between chapter 15 debtors' foreign representatives and an entity that nominally held stock owned by the debtors whereby the stock would be transferred to the foreign representatives for administration in the debtors' Cayman Islands liquidation proceeding.
Procedures, Recognition, and Relief Under Chapter 15
Chapter 15 was enacted in 2005 to govern cross-border bankruptcy and insolvency proceedings. It is patterned on the 1997 UNCITRAL Model Law on Cross-Border Insolvency (the "Model Law"), which has been enacted in some form by more than 50 countries.
Both chapter 15 and the Model Law are premised upon the principle of international comity, or "the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws." Hilton v. Guyot, 159 U.S. 113, 164 (1895).
Under section 1515 of the Bankruptcy Code, the representative of a foreign debtor may file a petition in a U.S. bankruptcy court seeking "recognition" of a "foreign proceeding." Section 101(24) of the Bankruptcy Code defines "foreign representative" as "a person or body, including a person or body appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or the liquidation of the debtor's assets or affairs or to act as a representative of such foreign proceeding."
"Foreign proceeding" is defined in section 101(23) of the Bankruptcy Code as:
[A] collective judicial or administrative proceeding in a foreign country, including an interim proceeding, under a law relating to insolvency or adjustment of debt in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation.
More than one bankruptcy or insolvency proceeding may be pending with respect to the same foreign debtor in different countries. Chapter 15 therefore contemplates recognition in the United States of both a foreign "main" proceeding'a case pending in the country where the debtor's center of main interests ("COMI") is located (see 11 U.S.C. ' 1502(4))'and foreign "nonmain" proceedings, which may be pending in countries where the debtor merely has an "establishment" (see 11 U.S.C. ' 1502(5)). A debtor's COMI is presumed to be the location of the debtor's registered office, or habitual residence in the case of an individual. See 11 U.S.C. ' 1516(c). An establishment is defined by section 1502(2) as "any place of operations where the debtor carries out a nontransitory economic activity."
Upon recognition of a foreign "main" proceeding, section 1520(a) of the Bankruptcy Code provides that certain provisions of the Bankruptcy Code automatically come into force, including: (i) the automatic stay preventing creditor collection efforts with respect to the debtor or its U.S. assets (section 362, subject to certain enumerated exceptions); (ii) the right of any entity asserting an interest in the debtor's U.S. assets to...
